In an agreement between Pueblo County and the Pueblo West Metropolitan District (PWMD), a newly proposed excise tax on retail marijuana will be decided in the upcoming November 3rdelection. An excise tax is a tax imposed on the production of a specific good before it is sold commercially. The proposed excise tax, if passed, will have several different effects on the community of Pueblo West.
As a result of the excise tax, all of Pueblo West’s fifteen marijuana cultivation facilities (as well as the three additional facilities projected in 2016) would be required to pay a 1% excise tax on production starting in fiscal year 2016. This tax would then increase to 2% in 2017 before capping at 3% in 2018. This excise tax would only be collected from marijuana cultivation facilities within Pueblo West’s boundaries and would not impact all citizens of Pueblo West, but only those who grow, distribute, and purchase retail marijuana.
It is estimated that the proposed excise tax will bring in approximately $200,000.00 or 3% of the District’s general fund spending in 2016. It is further estimated that excise tax revenues will generate upwards of $500,000.00 in 2017 and $750,000.00 in 2018. These funds would constitute a large chunk of the District’s total budget and would serve as a way to fund community improvements within Pueblo West.
Unlike Pueblo County, Pueblo West is constrained by law (Title 32 of Colorado Revised Statutes) in its spending of retail marijuana excise tax revenue on only those services outlined in the District’s approved service plan. These services include improvements and maintenance to streets and roads, expansion and improvements to parks and recreational opportunities, and enhancing fire and emergency medical services.
How would marijuana growers absorb the proposed tax? It is likely that retail marijuana (not medicinal marijuana) would increase in price, causing consumers to fork over more cash than they currently do. Even though the excise tax is designed to tax distributor’s wallets, the effect would likely be passed down to retail marijuana customers.
Why would someone pay an increased amount at a retail facility when they could obtain the same product from a black market dealer at a lower price? Many fear that increased prices may lead customers to pursue more illicit avenues in their quest for marijuana, mainly through the black market. Although this is a possible scenario, Pueblo West’s proposed excise tax recommends a low initial tax of 1% in the first year and slow incremental implementation over 3 years to allow for market adjustments.
If approved by Pueblo West voters, the timing of the proposed excise tax would coincide with a simultaneous 2% reduction in retail marijuana sales tax by the State of Colorado in July 2017. This means that the consumer cost of retail marijuana would see a 2% sales tax reduction in the second year of Pueblo West’s proposed excise tax implementation.
It is important to note that as a Special District, Pueblo West receives no direct revenue from sales tax collected within our boundaries. The State of Colorado (2.9%) and Pueblo County (1%) are the only government entities that receive sales tax within Pueblo West. Pueblo West instead depends on a comparatively low 20 mills in property tax revenue and services and facility fees to support the local community.
While the reach of the excise on marijuana is undoubtedly far, it is up to the citizens of Pueblo West to determine just how far it will go. Voters have the final say on whether or not the tax is levied on November 3rd, and all are encouraged to have their voice heard on Election Day.